Shares of Adelphia Communications (NASDAQ:ADLAC) $22.45 -2.81% hit a bears "first hurdle" since our last update and action here hints that a market maker got a call from a seller looking to sell close to 1 million shares. The market maker perhaps assessed his/her risk to the $21.42 level of retracement, backed off his/her bid and let the stock pull in, ran the trade and bought into his/her inventory (gets about 3-cents a share) and now tries to get the stock higher and sell that inventory back to other market participants at a higher price.
On Tuesday, we "played" market maker and felt the break below retracement of $24 would have a market maker turning toward a sell side bias and subscribers may have shorted or put the stock on the break. Current action is going just like a bear had planned and feeling like you're in the market makers shoes and on the right side of things.
Any break of the $21.42 level may have the market maker playing further defense in any long inventory. For us, we now begin to observe that resistance should begin firming up at the $24.08 level. A short-term trader's stop can now be moved down from the $25.75 level (50% retracement) to just above the $24.08 level.
Adelphia Communications Chart - 60-minute interval
In Tuesday's market monitor we talked about the 60-minute interval chart of Adelphia (ADLAC) and how the stock was holding the 50-pd moving average and retracement support near $24. While subscribers were short/put the stock that day on the break at $23.99, the stock held tough the remainder of the session. However, things have gotten a little weaker as of late.
It's interesting to look at the volume on the 60-minute chart. See that "spike" in volume back near March 7th of 1 million near $25. Wouldn't it be neat if a market maker shorted 1 million shares to the market at that time, and then today covered that 1 million shares at $21.42 as he/she provided liquidity to a large seller?
We make this observation and now firmly believe that the stock shouldn't trade too much above the $24.08 level and the now rolling 50-period moving average. Any break much below the $21.42 level should have market makers playing further defense to the $18.76 level.
Note: Market makers have an advantage over you and I. They can better measure order flow. In recent observations we also noted that there was a peculiar option trade in the March 25 Calls that looked like it was most likely a seller in the calls that may have been looking for liquidity in the options market on a potential move lower.